Florida residents likely have some familiarity with former Baywatch star Pamela Anderson, and the actress recently divorced husband Rick Saloman after marrying him in 2013 and filing for divorce in 2014. Aside from it being the couple’s second attempt at marriage after a 2007 coupling that ended two months later in an annulment, this divorce also made headlines because of reported tax drama between the former spouses.
Celebrity gossip site TMZ alleges that Anderson received a $1 million divorce settlement after questions about possible tax evasion pressured Salomon. Forbes reports that tax issues sometimes come up in divorces as one party might be more willing to point out the other partner’s wrongdoing when a marriage is ending.
When a couple divorces, the division of property does not count as a sale, which means there is no income tax. According to IRS Publication 504, couples can transfer assets tax-free between themselves without limits when divorcing. However, the decisions a couple makes when dissolving a marriage can affect taxes later. For example, a person who sells property gained in a divorce would face taxes for the profits of the sale.
Communication and consistency become important in tax matters after a divorce as alimony is tax-deductible but a property settlement is not. Both partners should agree on what the money is to avoid the discrepancies that the IRS tends to look for when a couple divorces.
In a high asset divorce, details that seem inconsequential can become especially important later in regards to taxes. This is why one may wish to speak to an attorney when reaching a settlement agreement. Both spouses may be inclined to represent themselves in the best way possible when filing taxes after a divorce, which could lead the IRS to penalize one or both parties if a couple’s records are not the same.